Despite the underperformance of fixed income we discuss in this Spotlight guide why the value proposition of the asset class hasn't gone away. In particular we review how the RLAM management team use existing, proven funds to actively manage consistent monthly income streams and adapt the portfolio to changing interest rate and credit market factors.

Within this guide, you will find some surprising survey results from FE, a selection of adviser opinions and some Architas views too. We hope this guide will provide you with some food for thought on this burning issue.

The managers are now favouring more aggressive growth areas, according to Mark Noble, head of UK sales at SVM.

He said: 'Over the past few months, the funds have been moving into other sectors where they have not been for a while. We have not gone from a bearish to an outright bullish stance but we are more optimistic.

'We are trying to replicate themes across the portfolios. A driving area is merger and acquisition activity, which is on the increase. We want to be exposed to companies that are susceptible to this.'

Andrew Kelly, manager of SVM's £2.5m UK 100 Select fund, has sold out of some holdings such as AB Foods and trimmed exposure to oil and financial companies like Northern Rock and Alliance & Leicester.

He has replaced them with insurance stocks such as Aviva, Amvescap and Schroders, which he anticipates will perform strongly during a market recovery. Noble said: 'The fund has also added Yell, even though it is not in the FTSE 100. It is due to enter the index sometime in September.'

Merger and acquisition activity is also guiding the tactical plays in David Stevenson's UK Opportunities fund, as well as Paul Casson's Continental Europe portfolio.